Interest income on RBI Bond (cumulative)

Interest on RBI bonds is taxable under the head income from other sources assuming the bonds are held as an investment. Taxability of income under this head depends on method of accounting followed by the assessee namely cash system or mercantile system. In case you adopt the cash system of accounting then the interest on the bonds will be taxable in the year of receipt only. In case you adopt a mercantile system then the interest on the bonds will be taxable on accrual basis yearly even though you do not actually receive the interest. 

Most of the Banks follow Mercantile System for Fixed Deposits. I think they will follow the same in this case also for individuals. So the yield maynot be same as bank will account for the TDS deducted every quarter in the Interest Payable and there will be corresponding reduction in the interest when compounding. There is no clarity from the Bank. But the interest what I calculate after TDS is much higher than what HDFC bank pay to me in Non-cumulative option. Still my form 26AS is not updated. Only in may 2022 I will know how my bank accounts.